Report: Facebook's ad rates dip as pandemic curbs demand

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Facebook's advertising rates plunged in the past few months as the COVID-19 pandemic led to a drop in demand for the social network's ad inventory. Facebook's cost per mille (CPM) fell 15% to 20% in March from the prior month, per the media buying group of an ad holding company cited by The Wall Street Journal.

Facebook's CPMs dropped about 25% during that time, according to digital marketing agency Wpromote, which handles about $130 million in yearly ad spending on the social network. The platform's CPMs fell 20% from January to March, per marketing technology firm 4C Insights, which helps to managed $350 million in media spending on Facebook, Instagram and Twitter, the Journal reported.

The suspension of professional sports and the delay in the Summer Olympics until next year have led Facebook to ramp up its efforts to attract ad dollars that had been set aside for live sports on TV. Facebook rival Snap is taking the same approach, touting Snapchat as a place where fans continue to watch sports content, according to the Journal.

Insight:

Facebook's declining CPMs may create an opportunity for mobile marketers seeking to reach consumers who have grown more reliant on the social network to stay connected with the outside world as the pandemic keeps them stuck at home. Unfortunately, record job losses and suspended business activity are taking a toll on consumer demand for a wide range of products and services aside from necessities, leading many advertisers to cancel, delay or revamp campaigns. Until there are signs that the pandemic is contained enough to allow the lifting of lockdowns in the U.S., many mobile marketers are likely to remain cautious about media spending.

The Journal's reporting helps to confirm other studies that have seen a decline in conversion activity that's a key performance indicator (KPI) for direct-to-consumer brands that tend to depend on digital platforms like Facebook for sales. Facebook's cost-per-click (CPC) rate for brands plunged 31% to nine cents by mid-March from 13 cents in late February, according to a study by social media marketing firm Socialbakers. However, in regions that are showing signs of recovery from the pandemic, the CPC rate has rebounded sharply. After falling in East Asia in January and February, CPC rates bounced back 22% last month, according to the firm.

4C reported a 5% decline in ad spending on Facebook and Instagram last month from a year earlier, per the Journal. Despite the drop, Facebook showed signs of recovering during the last week of March. Its CPMs rose 8% during the week of March 30 from the prior week, while conversion rates climbed 10%, per Wpromote data cited by the Journal.

For Facebook, the pandemic likely will lead the social network to report its first decline in ad revenue since going public in 2012. The company hinted in a blog post that its ad business had been "adversely affected" by the pandemic, and will provide more details when it reports quarterly earnings on April 26. Some analysts have cut their revenue forecasts for the year to reflect a pullback in ad spend on digital platforms, including search giant Google.